The Institute of Chartered Accountants of Jamaica (ICAJ), of which I am the current president, is celebrating 50 years of existence, having been formed in 1965. After reflecting on the importance of the accountancy profession, and considering where we are as a country today, I thought it would be good to highlight the importance of the accounting profession to Jamaica.
This is especially in light of a problem I see many SMEs facing; that of improperly prepared accounting records. This not only restricts their growth potential but also causes challenges with accessing credit. Even when they are able to access credit the cost of funds is higher because financial institutions cannot do a proper credit assessment.
Many business people do not see the importance of accountants, and records, until it is too late. So the emphasis is on producing and selling products, or services, but no emphasis is placed on record keeping, filing tax returns, and other proper governance practices. SMEs need to understand the importance of this for their own growth and development.
This is where the accountant plays a very important role in development of businesses, at the micro level, and ultimately economic and social development.
The first thing to understand is what to look for in an accountant. Just like when you are buying an appliance there are certain brands that are tried and proven, it is also important to ensure before you buy accounting services that you are getting good quality.
Many people use accountants who are not suitably qualified to prepare their records,. I have seen this time and time again. Usually the customer complains about the accountant's service after the fact. And many times we discover that the accountants are not members of the ICAJ, and so we have no jurisdiction over them.
This is where the ICAJ, and the Public Accountancy Board (PAB), come into play, as these two bodies regulate the accounting profession and by extension issue membership and practising certificates to their members. One can therefore be reasonably assured that the quality one gets with someone holding this certification is of an acceptable standard.
The PAB is the regulatory body for the profession in Jamaica, and is so empowered to do so by law. The ICAJ goes further by certifying accountants as chartered accountants. In other words, even if you have passed all the accounting exams in the world, you cannot legally hold yourself out to be a chartered accountant unless you are a member of the ICAJ. Anyone who does that is liable to prosecution.
The chartered accountant title gives assurance to the public that the accountant is of a minimum standard, as he must pass certain exams; have a certain number of years of experience; be recommended by two members; pass an ethics exam; and not have any integrity issues.
Earning the right to be called a chartered accountant is a rigorous process, as even after all of that you are interviewed by a panel if there is anything that needs specific answers. Acceptance is not automatic.
The 2008 global financial crisis, for example, was partially caused by a lack of proper accounting reporting, as the valuation of securities was not properly reported. Assuring that they had been may not have prevented the crisis, but it would have alerted people about the problem before it became so big. In Jamaica, we would have stood a better chance than the US because of our use and application of IFRS, unlike the US standards in place at the time.
If we are going to move Jamaica's SMEs forward, then we must understand the important role that properly qualified accountants play. Look at the capital markets and companies on the stock exchange. Many people purchase shares on the exchange as long-term investments for their retirement years. The quality of the audited financial statements is very important, as if the reports are inaccurate, then it can lead to a lot of heartache in the future when and if the inaccurate reports affect the viability of the company. This is why I always urge people that the first section to look at in a set of audited financial statements is the audit report -- because if it includes a qualification it may not make sense to rely on the rest of the report.
The ICAJ and PAB recognise the need to protect the users of financial statements, and have put in place practice monitoring (quality assurance) and other programmes to reduce the risk of inaccurate reports being fed to the public. But as always it is up to the "buyer to beware".
In other words, check the credentials of the accountants you do business with -- and whose reports you rely on. One way you can do that is by checking the listing of members on the ICAJ website, or simply calling the ICAJ.
As the ICAJ celebrates 50 years of existence, it is appropriate to highlight the important role of accountants in national development. But as with any product or service, the user must be fully aware of what is being purchased.
Dennis Chung is a chartered accountant and is currently Vice President of the Institute of Chartered Accountants of Jamaica. He has written two books: Charting Jamaica’s Economic and Social Development – 2009; and Achieving Life’s Equilibrium – balancing health, wealth, and happiness for optimal living – 2012. His books are available on Amazon.com. He blogs at dcjottings.blogspot.com. He can be reached at firstname.lastname@example.org.
This article is published with permission. It was published on Dennis Chung's blog, dcjottings.blogspot.com, on Friday, March 6, 2015.